Column:, Intensive Care, Health Care Providers and the Automatic - PDF document

Column:, Intensive Care, Health Care Providers and the Automatic Stay: Is Medicare Termination Different than Exclusion? November 2006 Reporter 25-9 ABIJ 32 Length: 5612 words Author: Written by: Nathaniel M. Lacktman, Foley & Lardner LLP; Los Angeles, nlacktman@foley.com Keith C. Owens , Foley & Lardner LLP; Los Angeles 1 , kowens@foley.comWritten by: Nathaniel M. Lacktman, Foley & Keith C. Owens , Foley & Lardner LLP; Los Angeles 1 , Lardner LLP; Los Angeles, nlacktman@foley.com kowens@foley.comWritten by: Nathaniel M. Lacktman, Foley & Lardner LLP; Los Angeles, nlacktman@foley.com Keith C. Owens , Foley & Lardner LLP; Los Angeles 1 , kowens@foley.comWritten by: Nathaniel M. Lacktman, Foley & Lardner LLP; Los Angeles, nlacktman@foley.com Keith C. Owens , Foley & Lardner LLP; Los Angeles 1 , kowens@foley.comWritten by: Nathaniel M. Lacktman, Foley & Lardner LLP; Los Angeles, nlacktman@foley.com Keith C. Owens , Foley & Lardner LLP; Los Angeles 1 , kowens@foley.com n1 Jonathon E. Cohn, a partner in the LosAngeles office of Foley & Lardner LLP and a member of the firm's Health Industry Team, also contributed to this article. He practices health care litigation and represents clients in matters involving long-term care, licensing and certification, elder abuse, civil and criminal enforcement, and other regulatory and administrative proceedings. Nathaniel Lacktman is an associate in the Los Angeles office of Foley & Lardner LLP and is a member of the firm's Health Industry Team, where he practices health care litigation. Keith Owens is a partner in the Los Angeles office of Foley & Lardner LLP and a member of the firm's Business Reorganizations Practice Group, where he focuses his practice on creditors' rights, bankruptcy and commercial litigation. Text In recent years, hospitals, physician groups, nursing facilities and other health care providers have [*32] experienced a decrease in revenue, particularly as Medicare and Medicaid reimbursements have failed to keep pace with inflation and the increased expense for medical treatment continues to increase. Many of these providers have been forced to seek bankruptcy protection. Due to the proliferation of health care bankruptcies, Congress established various requirements and obligations specifically addressing health care providers in bankruptcy. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the Secretary of Health and Human Services may "exclude" a health care provider's participation in any federal health care program without violating the automatic stay. 2 BAPCPA's new exception to the automatic stay (11 U.S.C. § 362 (b)(28)) ostensibly permits the government to exclude a health care provider from participation in the Medicare and Medicaid programs, sometimes referred to 1 Jonathon E. Cohn, a partner in the Los Angeles office of Foley & Lardner LLP and a member of the firm’s Health Industry Team, also contributed to this article. He practices health care litigation and represents clients in matters involving long-term care, licensing and certification, elder abuse, civil and criminal enforcement, and other regulatory and administrative proceedings. 2 11 U.S.C. § 362 (b)(28) provides ″ the exclusion by the Secretary of Health and Human Services of the debtor from participation in the medicare program or any other federal health care program (as defined in § 1128B(f) of the Social Security Act pursuant to title XI or XVIII of such Act). ″ BAPCPA also established new rules for the disposal of patient records (11 U.S.C. § 351), requires that the bankruptcy court must order the appointment of a patient ombudsman within 30 days of the commencement of any health care bankruptcy case (11 U.S.C. § 333(a)(1)) and imposes a new duty on the trustee of a health care bankruptcy case to make ″ all reasonable and best efforts ″ to transfer patients to nearby facilities with ″ substantially similar ″ services that maintain ″ a reasonable quality of care ″ Id. § 704(a)(12)). The costs to close a health care business are given priority administrative status under the Act. Id. § 503(b)(8).

Page 2 of 8 25-9 ABIJ 32, *32 collectively as "the Program." However, BAPCPA does not discuss termination from the Program. Although bankruptcy courts have not yet determined the scope of the § 362(b)(28) exception, Program termination is not expressly covered. Therefore, the BAPCPA amendments do not appear to prevent a health care provider from employing the automatic stay to enjoin Program termination and termination of Program payments. Because § 362(b)(28) does not refer to "termination," a health care provider in bankruptcy will likely argue that the automatic stay enjoins the government from terminating the provider's Program participation. Unless the government can successfully assert that termination falls within the police or regulatory powers, 3 a health care provider in bankruptcy should continue to receive state and federal monies for its Medicare and Medicaid patients. 4 A brief explanation of the statutory and regulatory background of the Medicare and Medicaid programs sheds light on this technical, but essential, distinction. Medicare and Medicaid Certification The Medicare program is a federal health insurance program for the aged under which qualified health care providers are reimbursed by the federal government for the care they administer to Medicare program beneficiaries. The Medicaid program is a cooperative state-federal program that provides medical assistance, including nursing facility benefits, to needy persons regardless of age. Both the federal and state governments jointly fund the Medicaid program. The U.S. Department of Health and Human Services (HHS) administers the Medicare program through the Centers for Medicare and Medicaid Services (CMS), which provides health insurance benefits for aged and disabled persons by making payments directly to the institution or individual providing health care (the "provider"). 5 In order to receive Medicare and/or Medicaid funds, a provider must be certified as meeting the participation requirements prescribed by the Social Security Act and accompanying regulations. 6 If a provider meets the conditions of participation, it becomes eligible to participate in Medicare and/or Medicaid 7 by signing a contract with CMS (a "provider agreement"), renewable annually. Certification vs. Licensing Program certification is different and distinct from licensing requirements. Licensing regulates the quality of care provided by a health care facility and assures that the facility has the capability of providing a particularized service ( e.g., [*70] [EDITOR'S NOTE: The page numbers of this document may appear to be out of sequence; however, this pagination accurately reflects the pagination of the original published documents.] skilled nursing care or 3 See 11 U.S.C. § 362 (b)(4). 4 For another view of the impact of § 362(b)(28), see Maizel and Caplan, "Chicken Little Comes to Roost in Bankruptcy," ABI Journal, Vol. XXV, No. 6 (July/August 2006). 5 The CMS is a federal agency within the U.S. Department of Health and Human Services. CMS operates the Medicare and Medicaid programs and maintains oversight of the survey and certifications of health care providers. Prior to 2001, CMS was known as the Health Care Financing Administration or HCFA. See 42 U.S.C. § 1395cc(a). 6 The statutory requirements for participation in the Medicare and Medicaid programs are set forth in Titles XVII and XIX of the Social Security Act and codified at42 U.S.C. §§ 1395 et seq. and 1396 et seq. 7 42 U.S.C. § 1395cc. Providers that wish to receive both federal (Medicare) and state (Medicaid) funds must be certified to participate in both programs. A dually-certified provider signs two contracts: one with CMS and another with the designated state agency responsible for administering the particular state's Medicaid program. In California, for example, that agency is the Department of Health Services.